Rental rates forecast to rise in 2012

Monday

Vacancies fall in state as economy improves and more people are able to rent their own homes again

This could be the year great rental deals on apartments, condominiums and single-family homes disappear as rents move upward.

Statewide, a mixture of an improving employment picture, a lack of new apartments being built and falling vacancy rates has commercial real estate broker Marcus & Millichap forecasting hikes in rental rates in Florida's major markets this year.

"We've started hearing very frequently that people were able to raise their rents for the first time in a long time," said Bryn Merrey, vice president and regional manager for Marcus & Millichap's Tampa office.

There may be a bit of a lag locally, however, because smaller markets like Sarasota and Bradenton are slower to attract investment and had somewhat higher vacancy rates, says Frank Carriera, associate vice president of investments for the firm's Tampa office.

Rents have remained in check locally because of the number of foreclosed and bank-owned homes that are competing with the apartment rental market.

After a large decline in rents locally that began in 2007, rates started recovering this year and will likely go up 3 percent to 5 percent in 2012, said Jayci Grana, rental division director at Michael Saunders & Co.

New apartment complexes have not been built since the downturn, but construction projects are being considered in Florida's major markets. And Grana expects that, within the next year or two, new apartment complexes might become a popular investment in this area.

"I've spoken with a couple of investors looking at it," she said.

With bargains apparently still available and vacancy rates down, apartments are trading hands in the region already.

Earlier this year, Avalon Square Apartments LLC bought a 155-unit complex on U.S. 41 Business in Bradenton out of foreclosure for $4.1 million, the same price it had been bought for in 1998.

And a Tampa company bought a 194-unit apartment complex at 1818 9th Avenue E., in Bradenton, for $5.5 million. It had last sold in 2006 for $13.2 million.

Nationally, the apartment vacancy rate stood at 5.2 percent at the end of last year, down from 6.6 percent at the end of 2010.

Merrey notes the demand for apartments is tied closely to the unemployment rate. In particular, younger workers who moved in with parents or with a roommate during the downturn are credited with driving much of the improving demand for apartments as the economy creates more jobs.

While Merrey's firm sees national trends that will drive apartment vacancy rates down and rents up, the local picture is a bit murkier. Though the Sarasota-Manatee economy created 5,400 jobs in the 12 months ended in April, that figure includes agricultural employment that has grown in the last year, and no job growth has occurred at all in sectors that would bring more traditional apartment renters to the area. Added together, construction, retail, finance, business services, hospitality and government lost about 1,200 jobs last year. Those losses were balanced, however, by gains in education, health services and in manufacturing.

By comparison, the Tampa-St. Petersburg market gained 12,600 jobs in the past year in the construction, retail, finance and other white-collar sectors. Those gains showed up in the apartment market there. Vacancy rates in the Tampa market fell from 7.9 percent to 6.1 percent last year, and they are expected to sink to 5.7 percent this year, according to Marcus & Millichap's 2012 forecast.

Rental rates, meanwhile, rose 1.3 percent last year and are forecast to go up another 3.8 percent this year.

The commercial real estate firm has similar forecasts for other Florida markets:

• Orlando's vacancy rate fell from 7.6 percent to 6.7 percent last year and is expected to drop to 6.1 percent in 2012. Rents rose 1.3 percent last year and are projected to go up another 3.6 percent this year.

• Miami's rental market was already on the mend, with a 5.7 percent vacancy rate at the end of 2010. It fell to 4.7 percent last year and is forecast to drop to 4.1 percent this year. Though rents rose a modest 1 percent last year, they are slated to increase by 4.3 percent this year.

• West Palm Beach's vacancy rate fell from 7.5 percent to 6.6 percent last year and it is forecast to drop to 5.7 percent by the end of this year. Rents rose there more than elsewhere in 2011, posting a 1.8 percent increase. They are projected to grow 3.8 percent this year.

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